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Rise in foreign funds inflow

New Delhi, Aug. 8: Foreign direct investment (FDI) touched $13.44 billion during the first quarter of this fiscal, an increase of 133 per cent, indicating investors’ confidence in the economy.

According to economists, increased FDI can be because funds are coming back before the curbs come into force after the double taxation treaty reviews.

“The figures indicate that the trend of high FDI equity inflows since the beginning of the present financial year is being maintained,” commerce ministry officials said.

In the April-June period of the current fiscal, FDI went up to $13.44 billion from $5.77 billion in the corresponding period last year.

During the first six months of the 2011 calendar year, FDI increased 57 per cent year-on-year to $16.83 billion, officials said.

However, N.R. Bhanmurthy of the National Institute of Public Finance and Policy said, “The sudden surge in inflow could be due to government’s effort to review double taxation treaty. Perhaps funds are coming back before the curbs come into play. There has not been any big-ticket investment during the period and the economic numbers have also not been encouraging.”

The government is considering incorporating clauses in the double taxation avoidance agreements with several countries as it faces the heat on the issue of black money from the Supreme Court.

In May this year, the country received foreign investment worth $4.66 billion, a jump of 111 per cent over the same period last year.

The inflow increased 310 per cent in June at $5.65 billion compared with $1.38 billion in the year-ago period. .

The government expects the FDI inflow trend to continue this fiscal: The clearance of the Reliance-BP deal will bring in FDI over $7 billion, while the approval given to the Cairn-Vedanta deal, worth $8-9 billion, is also likely to substantially increase inflows.

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